Author Archive
Buffett talks fear, finances, and forging ahead
Posted by: | CommentsAre you scared to make a financial move right now? Are you getting seasick watching the market move? What’s The Oracle of Omaha investing in now?
The Warren Buffett Approach
Posted by: | CommentsPhilosophy and Style
Investment in stocks based on their intrinsic value, where value is measured by the ability to generate earnings and dividends over the years. Buffett targets successful businesses-those with expanding intrinsic values, which he seeks to buy at a price that makes economic sense, defined as earning an annual rate of return of at least 15% for at least five or 10 years.
Universe of Stocks
No limitation on stock size, but analysis requires that the company has been in existence for a considerable period of time.
Criteria for Initial Consideration
Consumer monopolies, selling products in which there is no effective competitor, either due to a patent or brand name or similar intangible that makes the product unique. In addition, he prefers companies that are in businesses that are relatively easy to understand and analyze, and that have the ability to adjust their prices for inflation.
Other Factors
• A strong upward trend in earnings
• Conservative financing
• A consistently high return on shareholder’s equity
• A high level of retained earnings
• Low level of spending needed to maintain current operations
• Profitable use of retained earnings
Valuing a Stock
Buffett uses several approaches, including:
• Determining firm’s initial rate of return and its value relative to government bonds: Earnings per share for the year divided by the long-term government bond interest rate. The resulting figure is the relative value-the price that would result in an initial return equal to the return paid on government bonds.
• Projecting an annual compounding rate of return based on historical earnings per share increases: Current earnings per share figure and the average growth in earnings per share over the past 10 years are used to determine the earnings per share in year 10; this figure is then multiplied by the average high and low price-earnings ratios for the stock over the past 10 years to provide an estimated price range in year 10. If dividends are paid, an estimate of the amount of dividends paid over the 10-year period should also be added to the year 10 prices.
Stock Monitoring and When to Sell
Does not favor diversification; prefers investment in a small number of companies that an investor can know and understand extensively.
Favors holding for the long term as long as the company remains “excellent”—it is consistently growing and has quality management that operates for the benefit of shareholders. Sell if those circumstances change, or if an alternative investment offers a better return.
SAC
Posted by: | CommentsI love to follow the lives of people that are doing the same things that I am an doing in a magnificent way. You can learn alot from following successful people in your chosen industry. I read an article the other day on cnbc.com on Steven A. Cohen of SAC capital and I not only learned a bunch but he put haphazard information in perspective for me and I have made a few bucks trading like him. Lesson, if you want to be at the top of your game study and learn from people at the top of theirs. Read his story he is one of my favorite people today. Thanks Steven for the knowledge.
Keathel H. Haynes III, Chief Investment Officer
http://www.blackswanmanagementllc.com/
We are businessmen who use technology as a tool. Let us create your website and develop it into a cash portal or update an existing website for your business to get more customers and make more money. Go to our site right now to learn how to use the web to get more customers.
Cohen grew up in Great Neck, New York, where his father was a dress manufacturer in Manhattan’s garment district, and his mother was a part-time piano teacher. He took a liking to poker as a high school student, often betting his own money in tournaments. Cohen credits the game to teaching him “how to take risks.” Cohen received a B.S. in economics from the Wharton School at theUniversity of Pennsylvania in 1978. While in school, a friend helped him open a brokerage account with $7,000 of his tuition money.
After Wharton, Cohen got a Wall Street job as a junior trader in the options arbitrage department at Gruntal & Co. in 1978, where he eventually managed a $75 million portfolio and six traders.
His first day on the job at Gruntal & Co., he made an $8,000 profit. He would eventually go on to make the company around $100,000 a day. Cohen was running his own trading group at Gruntal by 1984, and continued running it until he started his own company, SAC.
In 1992, Cohen started SAC Capital Partners with $20 million of his own money; today the firm manages $14 billion in equity.
Originally known as a rapid-fire trader who never held trading positions for extended periods of time, Cohen now holds an increasing number of equities for longer periods of time.
Wealth
Forbes Magazine estimates Cohen’s fortune at $11.4 billion in 2009, ranking him the 27th richest among the world’s billionaires..
In 1998, the Cohens purchased their 35,000 square feet (3,300 m2) home on 14 acres (57,000 m2) in Greenwich, Connecticut.
His 2005 compensation was reportedly $1 billion, considerably higher than his 2004 compensation ($450 million). ]2001 compensation ($428 million) and 2003 compensation ($350 million).
In addition, Cohen owns 7% of search engine Baidu.
Cohen lives in Greenwich, Connecticut, with his wife, Alexandra, and seven children — two being from a previous marriage.
Cohen serves on the Board of Trustees of Brown University and the New York-based Robin Hood Foundation.
In 1999, the publicity-shy. trader granted one of his first on-the record interviews to Daniel Strachman for his book Getting Started In Hedge Funds (Wiley 2000).
In December 2009, Steven A Cohen and his brother Donald T Cohen were sued by Steven’s ex-wife Patricia Cohen for racketeering and Insider Trading Charges.
Art collector
Cohen began collecting art in 2000, and over the past several years has become a prominent collector, appearing on Art News magazine’s “Top 10″ list of biggest-spending art collectors around the world each year since 2002, and Forbes magazine’s “Top Billionaire Art Collectors” list in 2005. To date, Cohen has bought around $700 million worth of artwork; in 2003, the New York Times reported that in a 5 year period, Cohen spent 20% of his income at art auctions. He is reportedly building a private museum for some of his artwork on his Greenwich property. In the winter of 2005 it became known that in 1999 Cohen had bought Edvard Munch‘s “Madonna”. Reportedly this was for $11.5 million, a record price for any Munch painting to this date.
His tastes in collecting changed “quickly” from Impressionist painters to contemporary art. He also collects ‘trophy’ art—signature works by famous artist.—including a Pollock “drip” painting fromDavid Geffen for $52 million and Damien Hirst‘s The Physical Impossibility of Death in the Mind of Someone Living, a piece that the artist had bought back from Charles Saatchi for $8 million. In the last two years, he reportedly paid $25 million each for a Warhol and a Picasso. He is a top patron of the Marianne Boesky art gallery.
In 2006, Cohen remarked that repairing his suspended shark artwork, a cost estimated to be a minimum of $100,000, was an “inconsequential” expense. Since the shark itself is over 10 years old, it has begun to rot and requires replacement. The replacement shark has already been caught. once the exhibit is fixed, Cohen will have it moved into his SAC office Cohen has also placed Marc Quinn’sSelf,a head sculpture made of frozen blood, in the SAC lobby.
In addition, in 2006 Cohen bought a landscape entitled “Police Gazette” by artist Willem de Kooning for $63.5 million from David Geffen. Also in 2006, Cohen attempted to make the most expensive art purchase in history when he offered to purchase Picasso‘s Le Reve from casino mogul Steve Wynn for $139 million. Just days before the painting was to be transported to Mr. Cohen, Mr. Wynn, who suffers from poor vision, accidentally thrust his elbow through the painting while showing it to a group of acquaintances inside of his office at Wynn Las Vegas. The purchase was cancelled, and Mr. Wynn still holds the painting. In November 2006, Cohen purchased another Willem de Kooning painting, Woman III, from David Geffen for $137.5 million.
Words From Warren…
Posted by: | CommentsTo the Shareholders of Berkshire Hathaway Inc.:
Our gain in net worth during 2009 was $21.8 billion, which increased the per-share book value of both our Class A and Class B stock by 19.8%. Over the last 45 years (that is, since present management took over)book value has grown from $19 to $84,487, a rate of 20.3% compounded annually.*
Berkshire’s recent acquisition of Burlington Northern Santa Fe (BNSF) has added at least 65,000shareholders to the 500,000 or so already on our books. It’s important to Charlie Munger, my long-time partner,and me that all of our owners understand Berkshire’s operations, goals, limitations and culture. In each annual report, consequently, we restate the economic principles that guide us. This year these principles appear on pages89-94 and I urge all of you – but particularly our new shareholders – to read them. Berkshire has adhered to these principles for decades and will continue to do so long after I’m gone.In this letter we will also review some of the basics of our business, hoping to provide both a freshman orientation session for our BNSF newcomers and a refresher course for Berkshire veterans.
To download and read the entire annual report please click the link below:
10 Most Influential People on Wall Street
Posted by: | CommentsThe 10 Most Influential People on Wall Street
10. Gary Cohn 
President and COO
Goldman Sachs Group
As the sole president and COO of a team-obsessed firm that likes to see “co-” in executive titles, Gary Cohn is widely viewed as an heir apparent to the gilded Goldman Sachs throne. The 49-year-old former currency trader has long been at the side of CEO Lloyd Blankfein, going back to their days at J. Aron. In recent years, Cohn has helped Blankfein run the firm’s trading and principal investing operation, which has powered Goldman’s profits. In March, Cohn told a conference audience that the investment banking business was alive and well and that Goldman, for one, had no intention of changing its business model, even if it had become a bank holding company. Declared Cohn: “Wall Street is not over.”
9. Kenichi Watanabe 
Chief Executive Officer
Nomura Holdings
It was what the Japanese might call daitanfuteki — daring. When Lehman Brothers collapsed last year, Nomura CEO Kenichi Watanabe promptly acquired the bank’s international operations for $225 million — and committed to paying an additional ¥140 billion ($1.5 billion) in bonuses to keep the Lehman bankers on board. At a stroke, Watanabe, 56, boosted Nomura’s head count by nearly 50 percent, to more than 25,000. And in December, Nomura said it would spend almost half of the nearly $5 billion the firm had raised in October to boost its U.S. presence in a bid to achieve Watanabe’s goal of becoming a true global investment bank
8. Anshu Jain
Head of Global Markets
Deutsche Bank
As one of the engineers of Deutsche Bank’s transformation into a powerhouse in global investment banking, Anshu Jain, 46, is often touted as a potential successor to CEO Josef Ackermann (see No. 3). Nevertheless, the Indian-born Jain may well be quietly relieved that his boss has delayed his retirement until 2013, since that will give Jain plenty of time to distance his global markets division from its €7.4 billion ($10.9 billion) loss in the 2008 financial crisis. In the first nine months of 2009, revenue nearly tripled in Jain’s sales and trading operation, to €9.9 billion. Although Jain was named to the bank’s governing Vorstand in March (along with three other potential Deutsche CEOs), rumors surfaced in June that he might go to Citi, and he wound up affirming his allegiance to Deutsche. A cricket lover, he will need the sport’s virtues of patience, persistence and fair play to land the top job in a competitive field.
7. Thomas Montag
President, Global Banking and Markets
Bank of America/Merrill Lynch
Bank of America Corp.’s controversial purchase of Merrill Lynch & Co. may have cost BofA CEO Ken Lewis his job, but Tom Montag, 52, is doing his best to demonstrate the logic of the deal. Montag’s global markets business booked $6 billion of net income on $17.2 billion of revenue during the first nine months of 2009 — virtually all of the bank’s profits and 18 percent of overall revenue. Montag, a 22-year veteran of Goldman Sachs Group who had co-headed that firm’s powerful trading unit, largely succeeded in holding Merrill together during a tumultuous period. Now he needs to prove that his bankers and traders can use BofA’s balance sheet to win deals and consistent profits as markets recover.
6. James Gorman
Chief Executive–designate
Morgan Stanley
James Gorman, CEO-designate of Morgan Stanley, has taken temporary offices on the firm’s trading floor. Gesture or not, this sends a strong signal that the 50-year-old Australian lawyer with a Columbia MBA and a background chiefly in strategic planning (McKinsey partner) and asset management (head of private clients at Merrill Lynch) is committed to trading and other investment banking activities. He affirmed that palpably in late December by naming Paul Taubman and current CFO Colm Kelleher as co-presidents of institutional securities, Morgan’s biggest business. Hired in 2006, Gorman oversaw the creation of Morgan Stanley Smith Barney, now the world’s largest brokerage firm, to balance the volatile investment banking business. He succeeds John Mack, who becomes chairman, in January. The onetime consultant’s mission: to restore Morgan — still one of Wall Street’s most powerful firms — to its former glory after a decade of management turmoil.
5. Brady Dougan
Chief Executive Officer
Credit Suisse
Unlike his arch-rivals at UBS, Credit Suisse CEO Brady Dougan managed to avoid a government bailout during the financial crisis by raising capital in the Gulf. Nonetheless, the big Zurich bank experienced a rocky 2008. So with markets reviving strongly in 2009, Dougan, 50, prudently dialed down risk and cut back on proprietary trading and structured product activities to concentrate on flow business in bonds and equities and on gaining market share in prime brokerage. Credit Suisse has bounced back impressively and is once again solidly in the top tier of global investment banks. Even the private banking arm raked in money, despite U.S. officials’ probe into offshore tax evasion by Americans. The big question now: Will Dougan ramp up risk-taking, when conditions permit, and open CS’s hefty checkbook for acquisitions?
4. Robert Diamond Jr.
President
Barclays
Never let a crisis go to waste. It’s a mantra of the Obama administration, but few have taken it to heart like Bob Diamond, an erstwhile supporter of John McCain. A former bond trader, Diamond, 58, turned Barclays Capital, the bank’s securities arm, into a global debt powerhouse in a decade, but that was just a prelude to his biggest move: buying the U.S. subsidiary of the bankrupt Lehman Brothers in September 2008, and gaining a franchise in equities and M&A. Now ensconced in Lehman’s old Times Square headquarters, Diamond is determined to make Barclays a top-three firm across the board. Given his track record, no one on Wall Street dares dismiss his ambitions
3. Josef Ackermann
Chief Executive Officer
Deutsche Bank
In 2008, Deutsche Bank suffered its first annual loss since World War II. For CEO Josef Ackermann, 61, it was a wrenching experience. But having led the bank through the worst global financial storm in 70 years, he stands to reap the fruits of recovering markets. Deutsche’s profits have rebounded strongly, and Ackermann has been able to renew his contract for three more years. A rare breed of player-coach, he combines managing a global investment bank with chatting up clients. Long active in industry associations, he has spoken out on, among other topics, the justification for bankers’ compensation. Now Ackermann is well positioned to lead Deutsche from trading powerhouse to balanced financial services firm and perhaps ensure his legacy in the process.
2. Lloyd Blankfein
Chief Executive Officer
Goldman Sachs Group
It once appeared as if Lloyd Blankfein would be best remembered for his rock-steadiness during the 2008 financial crisis. No, he reassured an anxious colleague, this wasn’t like storming the beaches at Normandy. Although the markets didn’t turn against Goldman Sachs in 2009, everyone from Washington politicians to ordinary citizens seemed to, as the firm prospered conspicuously while millions suffered in the recession. Ex–commodities trader Blankfein, 55, who became Goldman CEO in 2006 when Hank Paulson moved to Treasury, didn’t help with the backlash any when he quipped to a London newspaper that Goldman’s lavishly paid bankers were doing “God’s work.” Now he may be linked forever to that cringe-inducing quote. Still, Blankfein is a genuinely liked leader. And it’s a sure bet that in the next financial crisis, the president will install a hotline to Goldman’s offices.
1. James Dimon
Chief Executive Officer
JPMorgan Chase & Co.
No other banking leader has emerged from the financial crisis with as much authority, or respect, as JPMorgan Chase CEO Jamie Dimon. Under his leadership, JPMorgan has vaulted to near the top of almost every global investment banking ranking. For 2009 its revenue and profits appear headed toward record numbers. Known for inspiring fierce loyalty among his subordinates and having a passion for detail, Dimon must now contend with a changed financial landscape, a swelling array of competitors (even Goldman Sachs is now a “bank”) and greater government intrusion into the everyday business of finance. And though only 53, he must ensure his legacy by providing for a strong successor. He has begun by naming Jes Staley, formerly chief of the bank’s asset management arm, head of Morgan’s investment bank and by grooming a generation of 40-something leaders, including newly named asset management boss Mary Erdoes and CFO Mike Cavanagh.
Verizon Communication (VZ)
Posted by: | CommentsVerizon Communications
A friend of mine asked me if investing in Verizon communications (VZ) would be a prudent move. Instead of answering him directly I told him I would get back with him. I am going to tell him to check out this post. I am going to attempt to teach my friend how to fish instead of just giving him one. We are going to look at Verizon Communications (VZ) through the lens of the CAN SLIM investment strategy created by one of my favorites William O’Neal. 
CAN SLIM is an acronym for C= current earnings, A=annual earnings, N=new product/service or new management, S= Supply and Demand refers to trading volume,L= Leaders or Laggard, I= Institutional ownership (mutual fund, hedge fund or pension fund ownership) and the vitally important M= market direction. As of the writing of this the price of
Verizon Communications (VZ) is $28.93 their 52 week is range is $26.10-$34.13. Their current earnings per share last quarter were in line with consensus view of $.54 a share. Their annual earnings for 2009 $2.40 per share, which also met analyst consensus. There are currently no new products/services, no new management changes or new price changes.
Verizon’s daily average volume is 19,239,400 their volume is was 14,221,400 on Friday February 12th. Not a good sign. The top 5 companies in the telecom industry are cnsl, idtc, idt, ctl, and eght. None of these companies are setting the world on fire they are all laggards and not showing real strength. There are 5,622 large block institutional owners including State Street, Vanguard, Fidelty, Black Rock ,TIIA-CREF among others. Their turnover for the stock is low to moderate. The market is in a correction and has been for several weeks. At this time there is no catalyst to propel Verizon Communications (VZ) higher. According to the CAN SLIM investment strategy this stock would not be a buy. They do have a dividend of 6.6% but that is not a good enough reason to own the stock. If you own the stock I would buy puts to protect myself from falling prices or raise cash. If you must own telecom I would ask myself why and rule against it because the industry rank is currently 156. According to Investor’s Business Daily Verizon is 25th out of 38 stocks not a stock that would motivate me to buy. If you absolutely must own telecom buy one of the top 5 companies cnsl, idtc, idt, ctl, and eght. Otherwise I would find a better company in a more promising industry. At this time Verizon is not a buy.
Keathel H. Haynes III, Chief Investment Officer
http://www.blackswanmanagementllc.com/
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Berkshire Hathaway Retailing for $65
Posted by: | Comments
Warren Buffett, Now Retailing for $65
Berkshire Hathaway shareholders will vote Wednesday on a 50-to-1 split of the company’s Class B shares to finance a $26 billion purchase of Burlington Northern railway. Chairman Warren Buffett has described this purchase as an “all-in wager on the economic future of the United States” that, while potentially incurring short-term losses, will benefit Berkshire Hathaway over time. This reasoned, patient approach is trademark Buffett — the kind of investing that has spawned countless imitations. If tomorrow’s vote goes through, as the Wall Street Journal reports it likely will, average investors will no longer have to resort to crude mimicry of Buffett’s strategy–they’ll be able to purchase shares of his company.
Historically, Berkshire Hathaway shares have been split into Class A, which closed at $97,500 each on Friday, and Class B–known as “Baby Bs”–which closed at $3,247. These lofty prices discouraged small retail investors and the high-frequency traders who can buy and sell millions of shares in a millisecond. A 50-to-1 split of the B shares would drop their price to around $65, enabling an influx of new investors and making the company eligible for inclusion in the S&P 500 index (Berkshire Hathaway is the largest corporation excluded from the index).
Since Buffett has previously expressed concern that a share split would discourage long-term investing, the Burlington deal must have been attractive enough to change his mind. Opening up Berkshire to a new cadre of investors may puncture the legendary aura surrounding Buffett’s company, but it also exemplifies the pragmatism responsible for creating the aura in the first place.
Jan 19 2010, 2:50 pm by Nicole Allan
Should You Invest in Warren Buffett?
Posted by: | CommentsThis article was originally published on the CBS Money Watch site and was written by Conrad de Aenlle.
Warren Buffett
Wouldn’t you be thrilled if your portfolio achieved the same returns as Warren Buffett’s? It may seem impossible, but it’s really a snap: Just own shares in his corporate alter ego, Berkshire Hathaway (BRK-B).
- The price of entry for investors is coming down: On Wednesday, shareholders are expected to approve a 50-1 split of the company’s B-shares, which will take the share price down from around $3,260 to $65.
If history is an accurate guide — and there’s no guarantee it is — it’s a smart way to invest. A $1,000 stake in Berkshire at the start of 1990 would have grown to roughly $12,000 by the end of last year, crushing the broader market. Had you invested the same amount in Vanguard’s Standard & Poor’s 500 index fund(VFINX) and reinvested dividends, your stake would be worth about $4,750.
A handful of hedge fund geniuses may have produced results similar to Berkshire’s while operating from mountain aeries and using complex, opaque investment strategies. Buffett did it primarily by holding blue-chip American stocks in a publicly listed company. It doesn’t work flawlessly; Berkshire has lagged the market over the past year, returning less than 10 percent while the S&P is up more than 30 percent. But if you’re worried about such short-term horizons, don’t invest with Warren Buffett.
Buy Shares … in Moderation
Fund managers and financial advisers say you could do a lot worse than to own Berkshire. They suggest doing it in moderation, though, because as time goes on, Berkshire’s returns are likely to, well, moderate.
“If you listen to Buffett himself, he’s pretty confident in the long-term future of the company, but he has told people not to expect returns to be as good as in the past,” said Richard Graziadei, lead equity manager for TIAA-CREF Trust Co. “No one should go in thinking it’s going to replicate its past record.”
That record has been accomplished through Buffett’s display of many traits widely recognized as the right stuff of investing. He buys into established businesses with consistent earnings, not fledgling enterprises, and he insists on paying what he deems a bargain price. That often means going against conventional thinking and buying companies relegated to Wall Street’s doghouse. After he has made a purchase — this is another sign that he is uninterested in public opinion — he has the patience to wait until it pays off or until he determines that it probably never will.
It sounds simple enough. What sets Buffett apart from his peers is not his investment strategy, his admirers say, but his ability to implement it.
“You don’t have to have the I.Q. of an M.I.T. Ph.D. in math, but you do have to have common sense” to invest wisely, said George Schwartz, chief investment officer of the Ave Maria Mutual Funds. “The problem is a lot of people don’t apply common sense, they don’t look at investment opportunities with the cold logic that he does.”
Berkshire’s chief executive “is a master of contrarian thinking,” said Schwartz, who has kept a portion of his personal money in Berkshire since 1981. “That’s how to make money. You’ve got to buy when no one else is buying. He practices that.”
In Buffett’s Portfolio
He practices another key element of solid portfolio construction: diversification. The list of Berkshire Hathaway’s holdings reads like a What’s What of corporate America, including American Express (AXP), Coca-Cola (KO), Procter & Gamble (PG), Kraft (KFT), Wells Fargo (WFC), General Electric (GE), Goldman Sachs (GS), Dow Chemical (DOW), and Conoco Phillips (COP).
Berkshire reported $57.4 billion of stock investments and $37.4 billion in government and corporate bonds at the end of September. The remaining $36 billion or so of the company’s worth was accounted for by entities in which it holds more than a 20 percent stake, making them more like operating divisions. These include Geico and other insurance subsidiaries and Burlington Northern Santa Fe, the railroad that Berkshire took complete ownership of in November.
Buffett has always held a potent mix of businesses. Anyone who made a modest outlay, say $10,000, to buy Berkshire in the early 1980s, when Schwartz did, would be a millionaire now, barely a quarter-century later. There’s your retirement all squared away.
But as it says in the fine print of any investment, past performance is no guarantee of future results. Investment advisers caution that Berkshire’s returns are likely to dissipate, mainly because the company and Buffett have become victims of their own success. Berkshire’s market value of more than $150 billion and annual sales exceeding $100 billion suggest that it has run afoul of the law of large numbers. At that size, it takes ever bigger acquisitions to have a significant impact on earnings, so earnings growth is bound to slow.
“It’s not as easy for them to move the needle as when [Berkshire Hathaway] was a $15 billion or $20 billion company,” said Brian Washkowiak, director of research for Talon Asset Management, a Chicago financial planning firm. “We consider ourselves Warren Buffett disciples,” he added, “but I would advise against putting all your eggs into Berkshire Hathaway.”
Tom Forester, manager of the Forester Value Fund, noted that Buffett’s following with the public has sent Berkshire’s stock to a sizeable valuation premium over the broad market. It traded recently at 31 times its profits for the latest four quarters, compared with just over 20 for the S&P 500.
“I’m more a fan of [Buffett’s] investment acumen than I am of Berkshire,” Forester said. “I’m a value guy, too, so I don’t like paying premiums for things.” By other measures, however, Berkshire shares look cheaper: Barron’s estimates that shares are trading at 1.2 times book value.
The Age Factor
The other caveat issued to prospective Berkshire shareholders is actuarial, not financial. Buffett is 79, and his inevitable departure one day gives the laudatory remarks about him a more ominous ring. When Schwartz calls Berkshire “a unique company run by a unique individual,” it raises questions about how it will fare when someone who is not one of a kind takes over.
Whatever misgivings they may have about Berkshire, these investors consider it an excellent holding, as long as there are plenty of other assets to go with it. “What I would tell most clients is that they need other pieces of broad exposure,” Graziadei, of TIAA-CREF, advised. With Berkshire’s heavy concentration in large American companies, he would focus on complementary asset classes, such as bonds of different types; international stocks, including emerging markets for risk-tolerant investors; and possibly real estate. Washkowiak made similar suggestions, and he would also allocate capital to small and medium-sized companies.
When assessing Berkshire’s place in a portfolio and the right price to pay for the stock, investors would do well to give it the same scrutiny as Buffett does with his prospective investments, Graziadei said.
“You must be committed to truly understanding this company inside and out,” he said, “and developing the expertise to make a judgment call and buy when you think it’s undervalued.”
About the Author
Conrad de Aenlle has been an investment and personal finance writer for nearly 20 years, covering international markets, portfolio management, and financial planning, among other topics. His features and columns have appeared in newspapers and magazines worldwide, including The New York Times, International Herald Tribune, Washington Post, Los Angeles Times, Sunday Business, The Scotsman, Institutional Investor, Funds Europe, and International Fund Investment. After working in London and Paris for 14 years, de Aenlle is based in Long Beach, Calif.
5 Legendary Investors Whom You Are Sure to be Interested In
Posted by: | CommentsOriginally posted at the Investing School blog
We like to highlight the people that do exceptionally well in every industry. In sports, there are all-stars and in Hollywood, there are super stars. We follow these people and try to know everything about them because if we can’t be like them, we can at least know about them.
The investment industry is the same, where there are many people we termed Legendary Investors. Here are a few of them:
1. Warren Buffett
The Oracle of Omaha
Warren must be the most famous of them all because he is currently still running his own company and buying and selling investments. It also doesn’t hurt that he is the world’s richest man!
Recommended Books About Warren Buffett: The Snowball: Warren Buffett and the Business of Life
2. Jim Rogers
Jim Rogers--The Legend
Jim Rogers is a hedge fund manager who co-founded The Quantum Fund in the 1970s and subsequently made 42 times the investment in the next decade. His fame however didn’t rise until after he retired in 1980 as he made bold calls such as predicting China’s huge growth, the rise in commodity price as well as the credit crisis months before the gigantic collapse of the market in October of 2008.
Recommended Books By Jim Rogers: A Gift to My Children: A Father’s Lessons for Life and Investing
3. Peter Lynch
Beat the street by investing in what you know
Hired initially as an intern at Fidelity Investments, Peter Lynch eventually turned the Magellan Fund from $18 million under management to more than $14 billion. His most famous investment philosophy is “Invest in what you know” which is very easy to understand for the retail investor.
Recommended Books by Peter Lynch: One Up On Wall Street : How To Use What You Already Know To Make Money In The Market
4. Bill Miller
The jury's still out on Bill Miller's 'legend' status
Before 2007, Bill Miller was undoubtedly regarded as an legendary investor with his Legg Mason Value Trust outperforming the S&P 500 every year from 1991 to 2005. However, his many bad bets on the financial industries in 2008 has trashed his reputation as well as all the value he’s ever created for the fund’s shareholders through the years. While he is still managing the Legg Mason Value Trust Fund, many are asking for his resignation.
Books About Bill Miller: The Man Who Beats the S&P: Investing with Bill Miller
5. Benjamin Graham
If Warren Buffett was Luke Skywalker, Graham would be Yoda!
Perhaps more an educator than an investor, Benjamin Graham is considered one of the first to teach about value investing. His students included the likes of Warren Buffett and was very influential in providing his students with a sound investment framework. In fact, Warren Buffett described Graham as the second most influential person after Buffett’s own father.
Recommended Books by Benjamin Graham: Security Analysis: Sixth Edition, Foreword by Warren Buffett (Security Analysis Prior Editions)
Whether you agree with their investment philosophy or not, you can’t deny the success (through skill or luck) they’ve had in the past. However, as Bill Miller’s case pointed out, if it’s hard enough to pick consistent winning investments, it might be harder to pick a fund manager who will consistently out perform the board market!
The Art of Not Losing Money
Posted by: | CommentsRule No.1: Never lose money. Rule No.2: Never forget rule No.1
Warren Buffett
Follow these directions on your road to safety
Let’s take a moment and step away from technical analysis, stock tips, and high finance. Let’s talk about something that’s not quite as ‘sexy’ but is infinitely more important in your day-to-day dealings as an investor. Cash management and safety.
According to full-time trader and author Karl Denninger, “Return of capital is more important than return on capital. Put another way, the first rule of investing is “don’t lose money!” Everyone wants to chase a winner; this, unfortunately, is why most investors lose compared to the markets over time.”
The first thing an investor must master is The Art of Not Losing Money.
Most investors only focus on the possible gains to be made. Learning not to lose money sounds boring and we all want to make the big bucks when investing, but the fundamental skill that you must have as an investor is the ability to protect your capital and the patience to wait for the right opportunity in which to invest that capital. Any full-time trader (or professional gambler for that matter) will tell you that it’s fine to have the know-how, but if you don’t have a bankroll—you’re out of the game!
Most investment books and magazines will have plenty of articles about investment strategies, investment gurus, and investment advice. Few will tell you the naked truth—without something to invest, you will never be able to take advantage of the opportunities that come your way.
Karl Denninger feels that it’s “… fine to speculate with money you can afford to lose, but your core capital should never be exposed to a market that is trading on bubble economics unless you’re close to the door and can leave fast – and for most investors that’s not possible with their “long-term” funds. The key to long-term outperformance (the real goal in any such portfolio) is to STAY OUT during times like this, and take advantage of long-term (and deferred) tax advantages during periods when the markets are trading on fundamental value.”
Think about this for a minute: If you lose 50% in the market, you need to get a gain of 100% just to get back to even. How often will the market go up 100%? It will likely take many years. But, if you lose 20% in the market, it only takes a 25% gain to get back to even. 20% is still a lot, but a 25% rebound in the market is certainly a reasonable expectation and can be achieved in one year’s time.
Managing your cash really boils down to discipline. Just remember that as an investor, your bankroll is your lifeblood. Without it you can’t invest – it doesn’t get any simpler than that. Despite this simple truth, many people don’t see mastering The Art of Not Losing Money as a skill of the same importance as being able to calculate ROI or analyze emerging markets. All the investment strategies and hot tips in the world don’t mean anything, though, if you don’t have money to invest.
About the Author
Anthony Sills, M.B.A. formerly traded FOREX from the Atlanta Financial Center and has worked for stock advisory services, brokerages, Fortune 100 companies, and national banks. Mr. Sills is currently a licensed loan officer and freelance writer. You can reach him at anthony@professionalpenwriters.com.
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